What To Do With Your Coinbase Tax Documents? Your Know-It-All Guide!
In the year 2020, Coinbase had announced that they would not issue the 1099-K form for users, but, instead would replace the same with the 1099-MISC form for certain users. This turned out to be good news for the cryptocurrency users in the USA, as form 1099-K included a few created hindering gaps.
Having said that, irrespective of it all, this new addition of a 1099-MISC form of Coinbase wouldn’t still provide all needed benefits, especially when it comes to Coinbase tax reporting.
But, why was this form issued in the first place? Who benefits from it? Most importantly, what does one do with this tax form?
This is your blog to help find answers to it all! Read on, and know everything and all about the 1099-MISC form.
1099-MISC Form – What Does It Report And Who Received It?
This form of Coinbase includes all fees and rewards that are earned from Coinbase, USDC Rewards, and also staking the earnings of the Coinbase user in the past tax year. On the other hand, it does not include any form of income made via trading or selling crypto and will also not ever help cover other forms of taxable transactions like buying goods or services with crypto.
Here are two instances where you could receive this Coinbase tax form:
- If you used either Coinbase, Coinbase Prime, or Coinbase Pro in 2020 or beyond
- If you earned about $600 or more through fees or rewards from USDC Rewards, or Coinbase Earn during the year
Note: While the users who don’t qualify to receive the 1099-MISC form or any other from an exchange, they would still be expected to report cryptocurrency taxes.
The Question Of The Hour – What To Do With The Tax Documents From Coinbase?
As you might think that the reporting of crypto taxes is exclusively related to capital losses and gains, it isn’t the case after all.
The Coinbase tax documents help report the cryptocurrencies taxed as regular income. Here, the income is reported as per the status of employment.
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Self-Employed
If you are a self-employed person, that is a business owner, an independent contractor, and a freelancer, and crypto activities are a part of your business or trade, then you’d be expected to report under Schedule C on the Coinbase 1099-MISC form.
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Not Self-Employed
If you are not self-employed and file Form 1040, then the 1099-MISC Coinbase information will be reported as “Other income” under Schedule 1 and line 8 of the annual tax return.
If a user had an additional cryptocurrency activity like trading crypto on Coinbase, bought anything with crypto, or trading on any other exchanges—then the Coinbase 1099-MISC will unfortunately not include everything needed for a full crypto tax report.
Coinbase: Do They Report To The IRS?
Long story short – Yes, they do!
Coinbase sends two copies of the 1099-MISC Form out. Where one goes to the eligible user (with more than $600 from staking and crypto rewards), the other is sent to the IRS, directly. This means, if you received the 1099-MISC form from Coinbase, there is a 100% possibility that the IRS has received one too.
Final Words: Understanding Coinbase 1099-K Form
AS mentioned above, as Coinbase no longer issues the 1099-K form to their users, one might still experience the effects of the tax form, that is you used Coinbase between 2014 and 2019.
Adding on, while 1099-MISC reports all ordinary Coinbase income, the 1099-K form only reports the total volume of the sales and not the cost basis (the amount initially paid for crypto).
The 1099-K form tends to overreport the total cost of the capital gains a user has as it does not account for the cost paid for crypto sold later.
The IRS, on the other hand, has sent notices to crypto traders who have been suspected of underreporting their income. As per records, the Coinbase users have received IRS Letters 6174, 6174-A, or 6173; IRS Notice CP2501, and IRS Notice CP2000 – notices often based on incomplete information in the 1099-K form.
Thus, even though form 1099-MISC is fairly incomplete, it is for sure an improvement over tax forms used to send Coinbase.
FAQs: What To Do With Your Coinbase Tax Documents? Your Know-It-All Guide!
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What is the use of Coinbase?
A secure online platform, Coinbase is mostly used for buying, transferring, selling, and storing digital currency. The ideal mission is to create a financial system for the world and be a leading globally renowned brand that helps people convert their digital currency into and out of their local currency.
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What does the 1099-MISC form include?
This form of Coinbase includes all fees and rewards that are earned from Coinbase, USDC Rewards, and also staking the earnings of the Coinbase user in the past tax year.
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Why did I receive the Coinbase tax form?
Here are two instances where you could receive this Coinbase tax form:
- If you used either Coinbase, Coinbase Prime, or Coinbase Pro in 2020 or beyond
- If you earned about $600 or more through fees or rewards from USDC Rewards, or Coinbase Earn during the year
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